Yeshiva Leaders Face Financial and Legal Dilemma Over Military Draft Exemptions and Tax Benefits

In July 2026, a new challenge has emerged for leaders of ultra-Orthodox yeshivas in Israel concerning the military draft exemptions for their students and the institutions' tax benefits. The Knesset approved a temporary order (Section 27a) freezing the arrest of yeshiva students obligated to enlist, satisfying ultra-Orthodox political parties by protecting these students from immediate detention. However, legal experts warn this order conflicts with guidelines from the State Attorney regarding Section 46a of the Income Tax Ordinance, which governs tax benefits for religious institutions.

According to the tax guidelines, yeshivas cannot include students who are draft-dodgers (defined as those obligated to enlist but absent from service) in their official lists if they want to maintain eligibility for tax deductions that incentivize donations. This creates a dilemma: if yeshivas remove these students from their lists to keep tax benefits, those students may lose their legal protection from arrest under the temporary order. Conversely, if the students remain listed to preserve their legal protection, the yeshivas risk losing their tax-exempt status, which could severely impact their fundraising capabilities.

The push to revoke tax benefits for institutions listing draft-dodging students was led by MK Vladimir Beliak from the "Together" party, who demanded enforcement against continued tax breaks in such cases. The conflict places yeshiva leaders in a difficult position, forced to choose between financial stability and legal protection for their students.

Legal sources expect this issue to soon reach government ministries, the Tax Authority, and the State Attorney’s office to seek a resolution that prevents yeshiva heads from having to make this stark choice. Until then, the temporary order has only partially resolved the broader controversy over military service exemptions and their implications for ultra-Orthodox institutions.